Bank of Ireland economist Dan McLaughlin has predicted that house price inflation will slow to 6% this year from 14% in 2003.
In the bank's Irish Property Review, he says this will bring the price of an average house in Ireland to €291,000, and in Dublin to €385,000.
Dr McLaughlin's forecast is based mainly on an expected growth in employment this year, a possible delay in an interest rate increase and another record year of house building.
The economist does expect that Irish borrowers will experience a rate rise this year, though this will be pushed back to later in the year. He believes there is only 'a low probability' of an ECB cut on the back of further strength in the euro.
Dr McLaughlin expects the gap between house prices in Dublin and elsewhere to remain just above the 30% mark in 2004, but he points out that the gap between London and the rest of the UK is bigger at 60%.
He also says that mortgage lending increased by 25.7% last year, with total mortgage debt in Ireland rising to €59 billion.
Bank of Ireland is predicting that a recovery in the commercial property market will continue this year, with returns of 15%, compared with 12.7% in 2003.
